Saturday, 1 August 2009

Recession fears may be unfounded given likely gains in the second quarter, the Bangko Sentral ng Pilipinas (BSP) said on Friday.

"The drop in consumption in the first quarter was understandable given the very bleak scenario that loomed at the end of 2008," central bank Governor Amando M. Tetangco, Jr. said in an e-mail to reporters.

"Individuals increased precautionary savings. Firms may have also turned cautious while waiting for clearer signals on demand trends," he added.

The economy grew at an annual rate of 0.4% in the first quarter; seasonally adjusted it contracted by 2.3% from the previous quarter. That prompted some officials to say the country was teetering on the brink of a recession — defined as two consecutive quarters of contraction.

Results for the second quarter are scheduled to be released later this month.

"In the second quarter, however, we expect consumption to improve as enrollment-related expenses, among others, are made," Mr. Tetangco said.

"Firms may also be less cautious given early signs of stabilization that continue to be reported in the global financial and goods markets."

Growth in overseas Filipino worker remittances, which continue to buck expectations of a contraction from the likes of the International Monetary Fund and the World Bank, would also lead to a stronger second quarter.

"We remain positive on remittance growth. Remittance flows will continue to be supported by the steady demand for our workers abroad, specially the professional and skilled workers," Mr. Tetangco said.

"The expanded reach of banks and other financial institutions to overseas Filipinos is also expected to further encourage remittance growth going forward."

Growth is also expected to have been boosted due to an increase in government spending, which should have kicked in only in the second quarter since this year’s budget was only signed late in March.

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